Add Repco Home Finance, target price Rs 560: HDFC Securities

HDFC Securities has an add call on Repco Home Finance with a target price of Rs 560. The current market price of Repco Home Finance is Rs 412.4. Repco, incorporated in 2000, is a Small Cap company with a market cap of Rs 2569.08 crore, operating in the NBFC sector.

Repco Home Finance's key products/revenue segments include Interest, Other Operating Revenue and Other Services for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 424.19 crore, up 1.91% from last quarter Total Income of Rs 416.25 crore and up 10.49% from last year same quarter Total Income of Rs 383.91 crore. The company has reported net profit after tax of Rs 108.72 crore in latest quarter.

The company's top management includes Mr.C Thangaraju, Mr.K Swaminathan, Mr.Anant Kishore Saran, Mr.E Santhanam, Mrs.Usha Ravi, Mr.B Raj Kumar, Mr.Mrinal Kanti Bhattacharya, Mr.R Swaminathan, Mr.R Vaithianathan. Company has Chaturvedi & Co. as its auditors. As on 30-09-2024, the company has a total of 6 Crore shares outstanding.

Investment Rationale
Repco Home Finance's incumbent MD & CEO has implemented several initiatives over the past three years, including organisational restructuring, investments in distribution, tech transformation, and a focus on collections and recoveries. These initiatives are likely to enhance loan growth, which has remained significantly sub-par for the past few years (~5% CAGR during FY18-FY24). Productivity metrics (per employee, per branch) remain significantly low compared to peers, with room for improvement from diversification of sourcing channels and introduction of sales vertical. While early delinquencies remain elevated (GS II at ~11%), enhanced collections and recoveries have led to a favourable turn in credit costs, which is likely to remain muted in the near term.

HDFC Securities believes that the impending management transition towards the end of FY25 is unlikely to disrupt these changes. They have revised their FY25/FY26 estimates to factor in lower NIMs and higher other income and maintain ADD with a revised RI-based target price of Rs 560 (1x Sep-26 ABVPS). Revival in loan growth remains the key for any meaningful re-rating in the stock.

Promoter/FII Holdings
Promoters held 37.13 per cent stake in the company as of 30-Sep-2024, while FIIs owned 12.9 per cent, DIIs 19.9 per cent.